Western brands enter Russia

MOSCOW: Western brands are rushing to enter the increasingly lucrative Russian market, as the nation's middle class undergoes explosive growth.

Apple, and retailers Asos and Debenhams have launched in Russia, along with the super-franchise Peppa Pig children's brand, while Amazon is set to join eBay in the country, Marketing Week reports.

The Brookings Institution forecasts that the Russian middle class will grow by 16% up to 2020, representing 86% of the population with spending power of $1.3 trillion.

Marks & Spencer, the food and fashion retailer, now has 38 outlets in Russia, and is benefiting from rising demand for its affordable offerings. The UK chain has also taken advantage of the lack of local fashion retailers.

"There's a strong appetite for western brands [in Russia]," said Jan Heere, international director at Marks & Spencer.

"There are local players but they don't have the maturity that western brands bring in terms of product development and branding," he added.

Part of Marks' success is down to its understanding the difference between consumers in Russia and its home market, including showcasing textiles like cashmere and wool, which are exceptionally popular in Russian fashion.

Ian Wood, global strategy director at Landor, a marketing agency that works with Russian brands, noted that consumers have moved away from the ostentatious "bling" culture that arrived after the collapse of communism.

He suggested that consumers are taking a more open and value-driven approach to brands and spending.

Debenhams, which is also seeking to grow its Russian presence, has used the expertise of local partners to help it expand. It opened its first Moscow store last year through Debruss, a franchise company established with Russian business interests.

"Many retailers have gone to the Middle East because it's probably one of the easiest markets, but after that Russia offered the biggest opportunity for growth from a European perspective," said John Scott, head of international business development at Debenhams.

Meanwhile, worries about corruption and bureaucracy, which have put off some western companies, are being addressed. Russia joining the World Trade Organisation last year means it will have to obey a series of standards that will open the market further.